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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: AC Flyer who wrote (20024)	6/19/2002 1:05:56 PM
From: Box-By-The-Riviera™	Read Replies (1) \| Respond to of 74559

it's a sad day for MBA's

To: AC Flyer who wrote (20024)	6/19/2002 6:25:21 PM
From: TobagoJack	Read Replies (1) \| Respond to of 74559

Hi ACF Mike, On <<1) The dot com and telecomm mania led to a wicked bust (surprise) in the technology sector of the US economy which resulted in huge losses for those non-asset allocators who were fully invested in high tech.>> Yes. <<2) This bust was part cause of, part coincident with, a severe cyclical downturn in the manufacturing sector.>> Perhaps, maybe, possibly. <<3) While perhaps 1) and 2) should have led to a severe recession, they didn't, for the following reason. THE BABY BOOM GENERATION, NOW APPROACHING THE PEAK OF ITS SPENDING POWER, IS SUCH AN OVERWHELMING ECONOMIC FORCE IN THE US AND (to a lesser extent) IN EUROPE THAT THE SHOULD-HAVE-BEEN SEVERE RECESSION NEVER HAPPENED (unless of course you work in telecomm or high tech).>> Not altogether true. The innovation of spending one’s home had everything to do with the strange character of the non-recession, where jobs are lost, equity tanked, housing, fueled by FED/Fannie/Freddie, rose, and consumer spending remained up. And so your points 4 to 13 may not be true, and easily overturned by alternative explanations ‘epi-centered’ around FED/Fannie/Freddie and the spending of the home, same with the bullish story about your metal-basher manufacturing example. On … <<7) 6) plus the China/India factor will keep a lid on inflation for the foreseeable future.>> My explanation is yes, but the strength of the dollar supported by the left over hot air of the USD 8 trillion bubble had more than everything to do with keeping inflation down. We will now see asset value losses first tenderize the equity markets, then the housing and USD currency market. And … <<8) Which will mean - surprise - interest rates will stay low for the foreseeable future, returning us to the best possible environment for equities - high growth, high productivity, low interest rates - in short order>> … may or may not be true, depending on how bad events get and their affect on the supply and demand for money. <<9) Corporate earnings, starting now, will surprise to the upside, because of: kitchen sink write-offs; increases in demand; improved operating leverage resulting from lower fixed costs.>> … I will watch for these surprises, and if they happen and are deemed to be quality earning, I will be surprised, panic, and panic buy first. <<10) The high P/Es that the doomsters have been wailing about will drop precipitously as earnings improve sharply>> P/Es will drop, dividend rates will rise, and I suspect anyone fully invested in non-PM equity markets now will lose. <<12) Investors will focus on forward P/Es and decide that US equities are cheap>> The international investing electorates are voting as we discuss, and they are voting thumbs down, for the third year in a role. <<13) Gold's fifteen minutes of fame will be over by 4Q, 2002>> This prediction will be the easiest one to settle. We wait. Not terribly worried, Chugs, Jay

To: AC Flyer who wrote (20024)	6/19/2002 8:27:35 PM
From: LLCF	Read Replies (2) \| Respond to of 74559

<1) The dot com and telecomm mania led to a wicked bust (surprise) in the technology sector of the US economy which resulted in huge losses for those non-asset allocators who were fully invested in high tech.> Agreed... although this is where all the 'productivitiy' increases and 'growth' are... so even well diversified portfolios lost good money. See average mutual fund losses. <2) This bust was part cause of, part coincident with, a severe cyclical downturn in the manufacturing sector.> Good to see even some bulls agree that manufacturing actually IS important. It's been in a recession for years and ignored by most WS bulls. <3) While perhaps 1) and 2) should have led to a severe recession, they didn't, for the following reason. THE BABY BOOM GENERATION, NOW APPROACHING THE PEAK OF ITS SPENDING POWER, IS SUCH AN OVERWHELMING ECONOMIC FORCE IN THE US AND (to a lesser extent) IN EUROPE THAT THE SHOULD-HAVE-BEEN SEVERE RECESSION NEVER HAPPENED (unless of course you work in telecomm or high tech).> Agreed, although one must remember that a large % of the GDP numbers are government spending since 9/11... AND the mighty baby boomer is unlikely to further boost the economy... which is usually the case during a recovery... ie. pent up demand is unleashed. Why? Consumer debt is now growing faster than income to support the spending, and interest rates can't be further lowered to spur such borrowing. The mortgage numbers are unambigious in their message... 'cash out' loans may last a while longer and supply some boost... but they have probably flamed out. So going forward we need new investment.. not just more borrowing and spending by the consumer. THAT is the basis of all real recovery's. <4) Because of 3), the service and construction sectors, a very major part of the total economy, have not missed a beat.> You're talking 'residential' construction I assume... other construction numbers have already started a deep decline & vacancy rates are exploding in all major markets. <<5) While tech. is only beginning to show the first glimmers of recovery, manufacturing is now well on its way back.> Uhh... that's not what I'm seeing... got links??? I'll take your anecdote as your reasoning and deal with that shortly. <6) The sharp recession in manufacturing has been the cause of a steep jump in productivity as manufacturers continue to find ways to do more with less (people).> Wowa... what good is productivity without profits??? Proof that the hedonic pricing method is creating lots of nice looking numbers that make little sense IMO. Most of the productivity jump has been in Tech in case you didn't know... your statement is totally fallacous: Both JPMorgan and business week ran articles showing how manufacturing in the old economy is stuck at around 2%. The rest of the productivity gains comes from just 10% of the economy.... Tech. No one is finding out ways to do that much more with less people in manufacturing for the moment.. sorry. <7) 6) plus the China/India factor will keep a lid on inflation for the foreseeable future.> Yes, unless the [cough] dollar moves lower...... <8) Which will mean - surprise - interest rates will stay low for the foreseeable future, returning us to the best possible environment for equities - high growth, high productivity, low interest rates - in short order.> Except the low rates aren't doing shit yet... agreed though... can't hurt... except for your expectations in #7. <9) Corporate earnings, starting now, will surprise to the upside, because of: kitchen sink write-offs; increases in demand; improved operating leverage resulting from lower fixed costs.> Starting now... we'll they haven't started yet, so I suppose now is a good time. We've had the steepest decline since the 30's and what I'm seeing is NO increase in demand... time will tell I suppose. <10) The high P/Es that the doomsters have been wailing about will drop precipitously as earnings improve sharply.> JMO, but I think you're right about PE's... but wrong about E's if you know what I mean. There is simply WAY too much capacity and no demand, let along increases. Again, I suppose time will tell. The rest is the opposite of what's happening... but I suppose someone has to try to call the bottom. Good luck. Oh, yea... your 'evidence'... joe average company: Worthington has 3 main businesses: Metal Framing which showed a sales decrease of 2% on the back of what the company describes as a 'slow' construction market... refuting one of your main economic drivers above. Processed Steel Products sales were up, but offset by a decline in the spread between selling prices and material costs... and the big winner was Pressure Cylinders business about which the company said this: <<Within the Pressure Cylinders business segment, net sales increased 21% or $17.9 million to $104.5 million from $86.6 million in the comparable quarter of fiscal 2001. The increase is due to significantly greater demand for propane cylinders as a result of certain regulatory requirements mandating that all propane cylinders have overfill protection devices. >> This type of anecdote on a thread of this quality is a bit disturbing to say the least. DAK